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Long-Run Productivity Shifts and Cyclical Fluctuations: Evidence for Italy

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Silvia Sgherri

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Abstract

Using unobserved stochastic components and Kalman filter techniques, the paper assesses the relative importance of transitory and permanent shifts in Italian real GDP within a production function framework. Evidence suggests that the increase in hours worked that has accompanied pension and labor market reforms accounts for the bulk of low-frequency variation in growth, but points to factor utilization as the main driver of business cycle fluctuations. In contrast with the predictions of standard Real Business Cycle models, a positive shock to the underlying rate of total factor productivity growth generates a slight decline in hours, whereas the response of output to the same shock is found to be positive.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/228.

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Length: 37 pages
Date of creation: 21 Dec 2005
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Handle: RePEc:imf:imfwpa:05/228

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Keywords: Productivity ; Italy ; Business cycles ; Economic models ;

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bogdan Lissovolik, 2008. "Trends in Italy’s Nonprice Competitiveness," IMF Working Papers 08/124, International Monetary Fund. [Downloadable!]
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